CANADA FX DEBT-C$ hangs on to early momentum to end higher

3 Min Read

* C$ ends at C$1.0557 to US$, or 94.72 U.S. cents

* Peaks at 95.37 U.S. cents

* Bonds notch flat performance
(Updates to close, adds quotes)

By Jennifer Kwan

TORONTO, July 6 (Reuters) - Canada's dollar finished higher
against the U.S. currency on Tuesday, supported by rising risk
appetite around the globe, which helped boost equity markets
and some commodity prices.

The currency drew early momentum from the price of oil, a
key Canadian export, which climbed toward $74 a barrel, and as
world stocks posted their biggest gains in a month after recent
drubbings brought in bargain-hunters. [O/R] [MKTS/GLOB]

But the currency fell back from its intraday peak of
C$1.0486 to the U.S. dollar, or 95.37 U.S. cents, as oil prices
settled lower and U.S. equity markets lost steam on Tuesday
afternoon.

Sacha Tihanyi, currency strategist at Scotia Capital, said
a key catalyst behind the souring of investor sentiment was
data that showed the U.S. service sector expanded in June for a
sixth straight month, but the rate of growth slowed to the
lowest pace since February. [ID:nN06102990]

"It's another piece of data that speaks to the slowing in
growth momentum in the U.S.," said Tihanyi.

U.S. stocks are typically seen as a barometer of investor
risk appetite and can influence the direction of Canada's
currency.

The Canadian dollar CAD=D4 finished the session at
C$1.0557 to the U.S. dollar, or 94.72 U.S. cents, still
comfortably higher than Monday's finish at C$1.0650 to the U.S.
dollar, or 93.90 U.S. cents.

Firas Askari, head of foreign exchange trading at BMO
Capital Markets, said technical factors also influenced the
Canadian dollar's ascent.

"When it couldn't break through the C$1.0680 area you saw
some people caught short the Canadian dollar. The fast money
turned themselves around and now they're running to catch up,"
he said.

Askari said as Canadian currency gains, a key technical
level to watch for will be C$1.0472 to the U.S. dollar. If the
unit is able to pierce that level then the 200-day moving
average of C$1.0423 is the next target.

BONDS MOSTLY FLAT

Canadian government bonds were largely flat across the
curve as U.S. equity markets trimmed gains, said Sheldon Dong,
fixed income analyst at TD Waterhouse Private Investment.

"The big story was the fade in equity markets late in the
day," said Dong.

"The stock market opened up very strong so it was the
risk-on trade during the morning. Then when the equity markets
started to fade in the afternoon it was the risk-off trade."

The two-year government bond CA2YT=RR was up 2 Canadian
cents to yield 1.419 percent, while the 10-year bond
CA10YT=RR was unchanged to yield 3.081 percent.
(Reporting by Jennifer Kwan; editing by Rob Wilson)